Google search “retirement” and you’ll find plenty of stock photos of couples dining, dancing, and generally having the time of their lives. But you’ll find more pictures of palm trees and beaches. Anymore we associate our post-work years with idyllic nothingness next to the ocean.
Many Americans dream of retiring overseas, somewhere warm with a long coastline and an endless supply of umbrella drinks. For some, it’s adventurous to live in a foreign country. For others, it seems like the more affordable option.
Since I’m writing this from Lima, Peru, I can say this with authority: It’s likely much different than you imagine.
My colleague shared an article with me about an American couple that decided to escape the rat race by retiring in their 50s to rural Chile on an income of just $3,000 per month.
Now, I’ll start by saying that I will never fault anyone for shaking up their life with an adventure in a faraway country. I spent the entire decade of my 20s accumulating a long list of stories, most of which can’t be shared in polite company. And now in my 40s, I’m still collecting stories, though they’re more tame these days.
So, if this smiling couple from South Carolina is enjoying their time in Chile, then more power to them. You only live once.
But I take issue with the dollar figures. There’s a perception that you can move to Latin America and live like a drug lord in a hacienda on a middle-class salary.
That’s not true though.
I mentioned that I’m writing this from Lima. For family reasons, I’m living here part time. My children are enrolled in school. There’s a sense of adventure most days. It’s fun. I’m enjoying my time here. But I can promise you that I’m not subsisting on $3,000 per month as the couple from South Carolina ostensibly is.
In fact, I pay more than that just in school tuition and fees. And I still have to put a roof over my head and eat. This might sound unbelievable, but my life in Dallas is considerably easier and cheaper than my life in Lima.
Now, let me be clear that I’m not complaining. But it’s important to know what exactly you’d be getting yourself into when retiring or relocating overseas. I’m just being honest.
Breaking Down the Cost
In Dallas, I sent my children to public school. Our school district was fine, and private school tuition was an unnecessary luxury.
In Lima, that would be unthinkable. This is a developing country, and quality public services are non-existent. If you want your kids to be functionally literate, you’re paying for it. And if you want them functionally literate in English, you’re paying even more: $1,000 to $1,500 per kid per month for a school of comparable quality to a good suburban American public school.
Housing is also surprisingly expensive. My urban apartment in Lima — which has no yard — actually cost more than my house in Dallas. And that house has a large yard.
The comparison isn’t exactly fair. My house in Dallas is in a middle-class neighborhood, whereas the apartment in Lima is in a ritzy, elite neighborhood. A property in the equivalent neighborhood in Dallas would be out of my price range. But you wouldn’t want to live in a middle-class neighborhood in Lima. Trust me. If you want to live in a neighborhood with quality construction, first-world amenities and — most importantly — security, you’re paying first-world prices.
Living expenses aren’t much different. My utilities cost more in Peru. Water and internet are cheap, but electricity is shockingly expensive, as it is in many developing countries.
If you shop in a grocery store, your monthly food bill in Lima is roughly the same as what it would be in any major American city. You can lower your bill by going to local markets, but do you really want to spend your Saturday mornings haggling over the price of a mango?
Labor is cheaper, for sure. Though it’s not a necessity, you can still get a live-in housekeeper for less than $500 per month who will essentially run your life for you. That’s nice, and simply doesn’t exist back home. But apart from cheap labor, nearly everything else in your life is going to be more expensive overseas, assuming you’re looking for comparable quality and convenience.
Now, prices for everything I mentioned are obviously cheaper when you get away from a major city. If you’re willing to live in the middle of nowhere, you can probably live well on less than $3,000 per month. But if that is your goal, you’ll have an easier time realizing it in rural America. You easily could retire in a small town in East Texas on less than $3,000 per month, live next to a lake, and still be a lot closer to friends and family stateside.
It might not be as adventurous. But it’s a lot more practical if you’re looking to retire on a budget.
So, if I might pass on a little retirement advice…
If you’re looking for adventure, by all means pack your suitcase and start a new life abroad. Just be sure you have enough cash for the journey.
If you want the best retirement possible on a modest budget, stay stateside and consider moving out of the city to a smaller town.
Speaking of retirement… in Peak Income I look for solid income investments that are a little outside of the mainstream. If you want to make your golden years a little more comfortable, it’d do you well to add a steady stream of money to keep your account afloat.